EXHIBIT 10.16
AGREEMENT FOR PROMOTION OF INTERNET ACCESS SERVICES
BETWEEN NTC AND EARTHLINK NETWORK
AGREEMENT FOR PROMOTION OF INTERNET ACCESS SERVICES
between
NTC AND EARTHLINK NETWORK
This Agreement For The Promotion of Internet Access Services ("Agreement") is
entered into between National Telephone & Communications, Inc., a Nevada
corporation located at 2801 Main Street, Irvine, California 92714 ("NTC") and
EarthLink Network, Inc., a California corporation located at 3171 Los Feliz
Boulevard, Suite 203, California 90039 ("ELN") and is entered into by the
parties with reference to the following facts.
A. ELN is a provider of Internet access services ("ELN Internet Access
Services") that has developed proprietary Internet access software
including Total Access Southern California, Total Access USA 800 and
Total Access USA, due for release in August 1995, (collectively, "ELN
Internet Access Products").
B. NTC is a reseller of long distance telephone services and products
("Telephone Services") that utilizes a nationwide, multi-level network of
independent sales representatives ("NTC IRs") to market its Telephone
Services to residential and small business customers ("Retail Customers").
C. NTC has recently developed promotional programs to market
telecommunications pagers to the Retail Customers in conjunction with the
marketing of NTC's Telephone Services by utilizing NTC IRs.
D. ELN desires to engage NTC's services to market the ELN Internet Access
Services to Retail Customers through (i) the development by NTC of
promotional programs to market the ELN Internet Access Products with the
NTC IRs ("NTC Internet Promotion Programs"), and (ii) the implementation
by NTC of such NTC Internet Promotion Programs.
E. NTC desires to develop and implement the NTC Internet Promotion Programs
for ELN on condition that (i) such NTC Internet Promotion Programs can be
developed and implemented in such a manner as to also support the NTC
IRs' efforts to market NTC's Telephone Services to the Retail Customers,
and (ii) NTC can be reasonably compensated for its efforts and expertise
in developing the NTC Internet Promotion Programs and reasonably
compensated for all Retail Customers added to the ELN Internet Access
Service because of the NTC Internet Promotion Programs.
NOW THEREFORE, for fair and reasonable consideration, the parties agree to
the following.
1. THE AGREEMENT.
NTC agrees to immediately begin efforts to develop an initial NTC
Internet Promotion Program ("Initial Promotion Program") for the review and
approval of ELN ("ELN Approval"), and ELN agrees such ELN Approval shall be
expeditiously completed. Following the
completion of such Initial Promotion Program and the ELN Approval, NTC agrees
to expeditiously initiate a good faith effort to produce a minimum of twenty
two thousand (22,000) new customers for the ELN Internet Access Services
utilizing an ELN Internet Access Product ("NTC/ELN Customers") during the
twelve (12) month period immediately following the execution of this
Agreement, although ELN understands NTC cannot guarantee to produce twenty two
thousand (22,000) NTC/ELN Customers within such twelve (12) month period.
ELN agrees to (i) on a timely basis and at no cost to NTC, provide NTC
with such ELN materials and services as are required to reasonably implement
the NTC Internet Promotion Programs during the term of this Agreement
including but not limited to the software and other materials reasonably
necessary for the NTC/ELN Customers to utilize the ELN Internet Access
Service through an ELN Internet Access Product ("ELN Internet Materials"),
(ii) waive ELN's twenty five dollar ($25.00) setup fee for all NTC/ELN
Customers, and (iii) provide satisfactory Internet access services for all
NTC/ELN Customers such that NTC shall not receive an unreasonable number of
complaints about the ELN Internet Access Service from the NTC/ELN Customers.
2. NTC'S INTERNET PROMOTIONAL PROGRAMS.
The parties agree that all NTC Internet Promotion Programs may include
but shall not necessarily be limited to (i) an NTC gift certificate program
similar to the gift certificate program used by NTC in previous and/or
current NTC promotional programs for pagers, and/or (ii) inclusion of the ELN
Internet Materials in an NTC package of materials for new NTC IRs. Any and
all such NTC Internet Promotion Programs used by NTC to produce the NTC/ELN
Customers shall be at NTC's sole discretion, subject to ELN reasonable review
and approval before implementation by NTC ("ELN Approval"), and at NTC's sole
cost including but not limited to the shipping/handling costs, if any, that
NTC may incur in delivering the ELN Internet Materials to a new NTC/ELN
Customer, but not including the cost of the ELN Internet Materials which
shall be provided to NTC at ELN's sole cost, including ENL's cost of delivery
to NTC, as set forth above in Paragraph 1.
The parties further agree that said ELN Approval of any NTC Internet
Promotion Program shall be at ELN's sole, but reasonable, discretion and NTC
agrees such sole ELN discretion shall include but is not limited to
(i) determination of the actual amounts of ELN Internet Materials needed to
supply NTC's current needs, which ENL agrees to make a good faith effort to
deliver to NTC, once ELN Approval is given, and NTC agrees such good faith
effort by ELN shall be sufficient to meet the intent of this Agreement,
(ii) determination that an NTC Internet Promotion Program may not be cost
effective for ELN, (iii) determination as to whether or not the NTC Internet
Promotion Program promotes the ELN Internet Access Service in any manner that
is misleading or that reflects unfavorably on ELN or that is contrary to
applicable laws and regulations, including without limitation those relating
to truth in advertising and fair trade practices, and (iv) adherence to
copyrights and trademarks of ELN and its licensors. It is understood and
agreed that NTC will distribute ELN's Internet materials only within the
United States and Canada.
2
NTC warrants and represents to ELN that, without ELN's specific prior
written approval, (i) NTC shall not knowingly ship or deliver more than one
(1) set of ELN Internet Materials to a single NTC IR, and (ii) NTC shall only
ship or deliver ELN Internet Materials to individual NTC IRs who NTC
reasonably believes to be end-user customers receiving the ELN Internet
Materials either for personal use or for the purpose of demonstrating the ELN
Internet Access Service to other potential end-user customers ("End-User
Customer") rather than receiving the ELN Internet Materials for the purpose
of reselling to other end-user customers. In the event NTC breaches the
warranty set forth in this Paragraph, then NTC agrees to be fully bound by
the terms, conditions, warranties and representations set forth in Exhibit 1,
attached hereto and incorporated herein by reference. ELN understands and
acknowledges that NTC IRs, in accordance with each NRC IR's specific
agreement with NTC, are not agents or employees of NTC.
NTC will ensure that contained in its Internet Promotion Program material
going out to NTC IRs will be an NTC memorandum delineating ELN requirements
concerning copyrights and trademarks of ELN and its licensors. NTC also
agrees that any NTC materials, and/or NTC IR materials provided to NTC for
its approval, containing note or mention of ELN and/or its licensors shall be
preapproved by ELN before being printed.
3. NTC COMPENSATION FOR DEVELOPING INITIAL PROMOTIONAL PROGRAM.
The parties agree that ELN shall pay NTC a fee of one hundred thousand
dollars ($100,000.00) specifically and solely for NTC's efforts and expertise
in developing the Initial Promotion Program ("Program Development Fee"). The
parties agree that a good faith deposit of fifty percent (50%) of such
Program Development Fee shall be paid to NTC on execution of this Agreement.
The parties further agree that at the time NTC completes the Initial
Promotion Program and the ELN Approval is given, the remaining fifty percent
(50%) of the program Development Fee shall be due and payable.
4. NTC COMPENSATION FOR EACH NEW NTC/ELN CUSTOMER.
ELN agrees to pay NTC twenty dollars ($20.00) for each new NTC/ELN
Customer who subscribes to the ELN Internet Access Service during the term of
this Agreement ("NTC Commission") if such new NTC/ELN Customer (i) pays ELN
for two (2) months usage of such ELN Internet Access Service ("Two Month
Period"), and (ii) remains as a subscriber to such ELN Internet Access
Service through the end of the Two Month Period. The parties agree that NTC
shall earn the NTC Commission at the end of the Two Month Period if the new
NTC/ELN Customer is still on said ELN Internet Access Service at the end of
the Two Month Period.
The parties agree that ELN, by the tenth (10th) calendar day of each
month, shall give NTC a reasonable accounting of all NTC Commissions earned
by NTC during the proceeding calendar month ("Accrued Commissions"). The
parties further agree that ELN shall pay the Accrued Commissions to NTC on a
quarterly basis in accordance with a schedule to be determined by good faith
negotiations between the parties following the execution of this Agreement.
3
5. SOFTWARE MIX.
NTC understands and acknowledges that the mix of software offered by ELN
to its potential subscribers has been licensed by ELN through its various
licensors. Thus, for reasons which are beyond the control of ELN, the
software in the ELN Internet Materials and/or the restrictions on the
licensing of such software may change at any time. If reasonably possible to
do, ELN agrees to give NTC a minimum of sixty (60) days notice of any change
in its software mix and/or licensing restrictions that might affect any or
all of NTC's active NTC Internet Promotion Programs.
6. PROPRIETARY RIGHTS.
NTC understands and acknowledges that title to and ownership of all
copies of software, whether in immediately accessible or encrypted form,
contained in the ELN Internet Materials provided to NTC, whether in machine
readable or printed form, and all related technical know-how and all rights
therein (including without limitation rights in patents, copyrights and trade
secrets applicable thereto) are and shall remain the exclusive property of
ELN and its licensors. NTC shall not take any action to jepradize, limit or
interfer in any manner with ELN's and its licensors' ownership of and rights
with respect to the aforesaid software and documentation. NTC shall have only
those rights in the software and documentation granted to it pursuant to this
Agreement. However, ELN understands and acknowledges that NTC has no control
over or liability to ELN for ELN Internet Materials once such materials are
shipped or delivered to an End-User Customer in accordance with the
provisions set forth in and/or intended by this Agreement.
7. PROPRIETARY NOTICES.
NTC, its employees and its agents shall not remove or alter any
trademark, trade name, copyright or other proprietary notices, ledgens,
symbols or labels appearing on or in copies of ELN Internet Materials and
shall use the same notices, ledgens, symbols or labels in or on copies of any
of the ELN Internet Materials provided to NTC.
8. EXPORT RESTRICTIONS.
NTC agrees that it shall not, directly or indirectly, export or reexport,
or knowingly permit the export or reexport of, the ELN software and the
documentation or any technical information about the products to any country
for which the United States Export Administration Act, any regulation
thereunder, or any similar United States law or regulation, requires an
export license or other United States governmental approval, unless the
appropriate export license or approval has been obtained. However, ELN
understands and acknowledges that NTC has no control over or liability to
ELN, its licensors or licensees for ELN Internet Materials once such
materials are shipped or delivered to an End-User Customer in accordance with
the provisions set forth in and/or intended by this Agreement. NTC
understands that the ELN Internet Materials will require a special export
license to be distributed outside of the United States and Canada.
4
9. RESTRICTED RIGHTS.
Use, duplication or disclosure of the of the ELN software by any unit of
the U.S. Government is subject to "Restricted Rights" as that term is defined
in the relevant Federal Acquisition Regulations and/or the Department of
Defense Supplement, as applicable.
10. INDEMNIFICATION.
A party to this Agreement ("Indemnifying Party") will indemnify and hold
harmless the other party ("Indemnified Party") and/or its respective
licensors and licensees against all claims, damages, suits, actions,
judgements, losses, costs, reasonable attorney fees and reasonable expenses
that the Indemnified Party and its respective customers or its licensees or
licensors may sustain or incur by reason of any breach of any Indemnifying
Party's warranties or representations contained in this Agreement, provided
that each party shall promptly notify the other of any such claim, demand or
suit. Promptly after the receipt by the Indemnified Party of notice of any
claim asserted by a third party that may give rise to the Indemnifying
Party's liability to the Indemnified Party and its respective customers or
its licensees or licensors under this Paragraph 10, the Indemnified Party
shall give to the Indemnifying Party written notice of such claim and
Indemnifying Party shall be entitled to participate, at its own expense, in
the defense of any such claim. Indemnified Party shall not pay, acknowledge,
compromise or settle any such claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonable withheld. The
parties agree that the Indemnifying Party's total aggregate liability for all
claims set forth in and intended by this Paragraph 10 shall not exceed five
hundred thousand dollars ($500,000); and ELN understands and acknowledges that
NTC has no control over or liability to ELN, its licensees or licensors for
ELN Internet Materials once such materials are shipped or delivered to an
End-User Customer in accordance with the provisions set forth in and/or
intended by this Agreement.
Each party hereto represents to the other party that the singular act of
executing this Agreement will not in itself violate any other agreement
previously executed by the party including without limitation any agreement
with a licensee, licensor or customer, and will not subject either party to
any claim set forth in or intended by this Paragraph 10.
11. DISCLAIMER.
EACH PARTY DISCLAIMS ALL WARRANTIES EXPRESSED OR IMPLIED CONCERNING THE
SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ALL WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE. THE EXPRESSED
OBLIGATIONS STATED IN THIS AGREEMENT ARE THE ONLY OBLIGATIONS ASSUMED IN
RESPECT OF MATTERS DEALT WITH IN THIS AGREEMENT.
12. AGENCY.
Neither party shall be deemed to be the employee, agent or partner of the
other, and neither shall have the authority to act on behalf of the other in
any manner whatsoever.
5
13. TERM OF AGREEMENT.
This Agreement shall automatically terminate on June 30, 1996 ("Automatic
Termination Date"). The parties agree this Agreement may be terminated by
either party prior to the Automatic Termination Date upon delivery of a
written termination notice ("Termination Notice") to the other party. In the
event one of the parties delivers such Termination Notice to the other party,
then this Agreement shall terminate on the thirtieth (30th) calendar day
following delivery of such Termination Notice ("Early Termination Date"),
unless such Early Termination Date is after June 30, 1996.
The parties agree to negotiate in good faith to determine the specific
obligations and liabilities of each party following the termination of this
Agreement which the parties agree shall include but shall not necessarily be
limited to (i) the rights and licenses granted to NTC under this Agreement
shall automatically terminate, (ii) any and all rights granted by NTC to the
NTC IRs shall automatically terminate, other than the normal-and-usual rights
that ELN grants to End-User Customers for such NTC IRs that are End-User
Customers, (iii) all copies of ELN Internet Materials delivered or shipped to
NTC by ELN which have not already been shipped or delivered by NTC to an
End-User Customer shall promptly returned by NTC to ELN, (iv) definition of
the actions and adjustments, if any, that may be necessary by the parties if
NTC does not produce the number of NTC/ELN Customers contemplated by this
Agreement, and (v) definition of the liabilities/obligations of each party
for NTC/ELN Customers received by ELN after termination of this Agreement but
resulting from the efforts and promotional programs of NTC prior to such
termination.
The parties further agree that the provisions set forth herein in
Paragraphs 6, 7, 10, and 11, and in Exhibit 1, respectively titled
"Proprietary Rights", "Proprietary Notices", "Indemnification", "Disclaimer",
and "NTC Warranties If Shipments Violate End-User Customer Rules" shall
survive expiration or termination of this Agreement.
14. DISPUTES AND VENUE.
In the event of any dispute, controversy or claim ("Disputed Matter")
between the parties to this Agreement or the breach thereof, the parties
agree to submit and are obligated to submit the Disputed Matter to binding
arbitration in accordance with the Rules of the American Arbitration
Association. The parties further agree that such arbitration shall be held in
the County of Orange in the State of California. By execution of this
Agreement, the parties irrevocably and unconditionally submit to the
jurisdiction of said arbitration in any such Disputed Matter.
15. APPLICABLE LAW.
This Agreement shall be construed, governed and enforced in accordance
with the laws of the State of California.
6
16. ATTORNEY FEES.
In the event of any Disputed Matter between the parties hereto in
connection with this Agreement, the prevailing party shall be entitled to
receive from the losing party all of its cost and expenses including but not
limited to court costs and reasonable attorneys' fees.
17. AMENDMENTS.
No amendment, modification, waiver, discharge or change ("Amendment") to
this Agreement shall be valid unless such Amendment is in writing and signed
by all the parties hereto.
18. ADDITIONAL DOCUMENTS.
Each of the parties hereto specifically agrees to execute such other and
further instruments and documents as may reasonably be required to effectuate
the terms, conditions and objectives of this Agreement.
19. SEVERABILITY AND COMPLIANCE.
If any term, condition or provision of this Agreement is found to be
invalid, contrary to law or otherwise unenforceable ("Invalid Provision"),
such finding shall in no way affect the validity or enforceability of the
other terms, conditions and provisions herein. Such other terms, conditions
and provisions shall be valid and enforceable as if the Invalid Provision was
never a part hereof. Each party hereto shall be excused without further
liability from the performance of any duty, obligation or responsibility
hereunder to the extent it is prevented form such performance by applicable
laws, rules or regulations or by the order or decision of any regulatory
authority.
20. WAIVER OF BREACH.
The waiver of one party of a breach of any term, condition or provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach of any type whether of similar or dissimilar
nature.
21. NOTICES.
Any and all notices, demands or other communications ("Notice") given
hereunder shall be delivered to the party to whom such Notice is addressed by
delivery in person or by delivery through United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to NTC: National Telephone & Communications, Inc.
2801 Main Street
Irvine, California 92714
Attn: President
7
If to ELN: EarthLink Network, Inc.
3171 Los Feliz Blvd., Suite 203
Los Angeles, California 90039
Attn: President
If delivery is by United States mail, notice shall be deemed to have been
given three (3) working days after being placed in such mail, as evidenced by
a mailing receipt. Either party may change its address for the purpose of
this Agreement by giving the other party written notice of its new address.
22. ASSIGNMENTS.
This Agreement and the rights and obligations granted or agreed to
hereunder may not be assigned by either party without first obtaining the
prior written consent of the other party which both parties agree will not be
unreasonably withheld; and any attempt to assign shall be null and void.
However, either party shall have the right to assign its rights and
obligations set forth in this Agreement to a successor company in the event
of sale or merger effecting its operations.
23. VALID ENTITY.
Each party to this Agreement which is a legal entity such as a
partnership, corporation or trust or the like represents that it is a validly
formed and existing entity, that it has the authority to enter into this
Agreement and that all acts necessary to make this Agreement valid and
binding have been done. The person or persons executing this Agreement on
behalf of such entity represents that they have the right and authority to do
so.
24. CONSTRUCTION.
Any rule of law to the contrary notwithstanding, this Agreement shall be
construed as if drafted by both parties regardless of which party or which
party's legal counsel either actually drafted this Agreement or printed or
physically memorialized this Agreement between the parties.
25. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, and each such
counterpart shall be deemed an original; but all of such counterparts taken
together shall constitute one and the same agreement.
26. USE OF PLURAL OR SINGULAR.
The use of the singular or plural number in any term, condition or
provision of this Agreement shall be deemed to include the other whenever the
context so requires.
27. ENTIRE AGREEMENT.
This Agreement sets forth and constitutes the entire agreement between the
parties with respect to the subject matter herein and
8
supersedes all previous agreements promises and representations, either oral
or in writing, between the parties hereto with respect to the transactions
covered hereby, the contains all the covenants and agreements between the
parties. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, orally or otherwise, have been made by
any party to this Agreement, or anyone acting on behalf of any party to this
Agreement, which are not embroiled herein.
28. BENEFITS.
The terms, conditions and provisions of this Agreement shall inure to
the benefit of and be binding on the parties hereto and all their respective
successors including but not limited to permitted assigns, executors,
administrators, heirs and representatives; and no other person or entity shall
have any rights whatsoever under this Agreement.
Agreed to effective on the 23rd day of June, 1995 in the County of Orange,
State of California.
NTC: ELN:
National Telephone & EarthLink Network, Inc.
Communications, Inc.
By: By:
- --------------------------- ---------------------------
E.R. Jacobs Sky Dayton
President & CEO President & CEO
9
EXHIBIT I
to
AGREEMENT FOR PROMOTION OF INTERNET ACCESS SERVICES
NTC WARRANTIES IF SHIPMENTS VIOLATE END-USER CUSTOMER RULES
In the event NTC breaches its warrantee set forth in Paragraph 3 of the
Agreement for Promotion of Internet Access Services by knowingly shipping or
delivering multiple sets of ELN Internet Materials to a single NTC IR whose
purpose in receiving such materials is for reselling ("Wholesaling IRS")
without ELN's specific prior written approval, then NTC agrees to be fully
bound by the following terms and conditions.
1. NTC shall be responsible for ensuring that such Wholesaling IRs adhere to
and agree to the terms in the sections is this Agreement entitled
Proprietary Rights, Proprietary Notices, Export Restrictions, and Restricted
Rights ("IR Material Terms"). NTC warrants and represents that it (a) shall
ensure that such Wholesaling IRs are informed of and will adhere to the IR
Material Terms and (b) will inform ELN immediately of any known breach
of such terms.
2. If NTC learns of any breach of an IR Material Term that could damage ELN
and/or its third party licensors, NTC shall take prompt, commercially
reasonably corrective action at its own expense to remedy the breach and/or
obtain all other appropriate relief and shall, in addition, immediately
notify ELN in writing of the breach and corrective action taken. The
execution of these duties by NTC shall not preclude ELN from also taking
corrective action.
3. In addition, if a breach in an IR Material Term occurs that would, in
ELN's opinion, result in irreparable harm to ELN and/or its licensors,
unless injunctive or other equitable relief is entered into to restrain
the violation, NTC shall, as requested by ELN, either (a) use its best
efforts to obtain such equitable relief as promptly as reasonably possible,
or (b) assign its rights against it to ELN to permit ELN to seek such
equitable relief.
4. NTC's obligations as set forth in this Exhibit 1 protect the interest of
ELN and its third party licensors shall survive expiration or termination
of this agreement.